Dow Jones futures tilted lower Monday night, along with S&P 500 futures and Nasdaq futures. House Speaker Nancy Pelosi told her Democratic caucus late Mondaythat she is no longer linking the bipartisan $1 trillion infrastructure bill to passage of a much-larger reconciliation package. That also comes as Senate Republicans blocked a bill to raise the debt limit and extend government financing.
XThe stock market rally had a mixed Monday, with the Dow Jones and small-cap Russell 2000 rallying while the S&P 500 and Nasdaq composite retreated.
Tesla stock extended Friday's breakout and hit yet another key level on Monday. That comes as Tesla (TSLA) plans to open FSD Beta to tens of thousands of Full Self-Driving owners or subscribers starting as soon as Oct. 1.
Advanced Micro Devices (AMD) rebounded bullishly from its 50-day and a trendline, both offering early buy signals.
Energy stocks powered higher on strong gains for crude oil prices and surging natural gas futures. Whiting Petroleum (WLL) and Targa Resources (TRGP) broke out of bases.
MGM Resorts (MGM) moved higher in a buy range while Hilton Worldwide (HLT) broke out. Travel stocks did well overall, with Covid cases continuing to trend lower. Airline stocks and cruise lines are rebounding after sliding for months.
Finally, rising Treasury yields continued to buoy financials. JPMorgan Chase (JPM) broke out of a cup-with-handle base on Monday.
Tesla stock and AMD are on IBD Leaderboard. AMD stock also is on SwingTrader and was Monday's IBD Stock Of The Day.
The video embedded in this article reviews Monday's market action and analyzes TRGP stock, AMD and PerkinElmer (PKI).
Pelosi Infrastructure Bill Decision
Speaker Pelosi, after months of trying to link the $1 trillion infrastructure bill to a much-larger, partisan spending, said she is no longer pursuing that plan. That's a victory for centrist Democrats, who believe the bipartisan infrastructure package, with some $550 billion in extra funding, was being held hostage. With a 3-seat Democratic majority in the House, Pelosi has little room to maneuver. It's unclear if left-wing Democrats will vote for the infrastructure deal, which will likely get only a handful of GOP House votes, without some sort of assurances on the reconciliation package. Pelosi has recently signaled the reconciliation bill will be smaller than the long-targeted $3.5 trillion, with Sen. Joe Manchin, D-W.V., pushing for $1 trillion to $1.5 trillion.
The infrastructure bill vote is currently set for Thursday. If the bill doesn't pass, then existing highway spending authorization runs out as well.
Meanwhile, Senate Republicans rejected a measure to avoid a partial government shutdown after Sept. 30. Republicans object to raising the debt limit as well, saying Democrats should do it themselves.
Dow Jones Futures Today
Dow Jones futures lost 0.1% vs. fair value. S&P 500 futures declined 0.2% and Nasdaq 100 futures fell 0.35%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally opened mixed and stayed that way, with the 50-day line acting as support or resistance in many cases.
The Dow Jones Industrial Average rose 0.2% in Monday's stock market trading. The S&P 500 index fell 0.3%. The Nasdaq composite sank 0.5%. The small-cap Russell 2000 popped 1.5%.
The 10-year Treasury yield rose as high as 1.51% early Monday, a three-month best. The benchmark yield closed up two basis points at 1.48%.
Many medical product stocks were down sharply, including Moderna (MRNA), Charles River Laboratories (CRL), Idexx Labs (IDXX), Repligen (RGEN), Dexcom (DXCM), Thermo Fisher Scientific (TMO), Intuitive Surgical (ISRG) and PerkinElmer. It's not clear why such an array of biotechs and medical product and systems makers would all be hard hit. A New York state mandate requires that over 665,000 workers in hospitals and nursing homes have at least one vaccine dose by midnight Monday or lose their jobs.
Meanwhile, a number of tech names fell hard, especially in software. Cloudflare (NET) tumbled 5.8% to essentially its 50-day line.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.25%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 1.7%. The VanEck Vectors Semiconductor ETF (SMH) gave up 0.4%, with AMD stock a major SMH component.
SPDR S&P Metals & Mining ETF (XME) popped 3.5% and Global X U.S. Infrastructure Development ETF (PAVE) advanced 1.2%. U.S. Global Jets ETF (JETS) edged up 0.7%. SPDR S&P Homebuilders ETF (XHB) climbed 0.8%. The Energy Select SPDR ETF (XLE) jumped 3.6%. The Financial Select SPDR ETF (XLF) rose 1.4%, with JPM stock a major holding.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) dipped 0.1% and ARK Genomics (ARKG) fell 0.5%. Rising Tesla stock is the top holding across Ark Invest ETFs, but they've generally struggled over the past few months.
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Tesla Stock
Tesla rose 2.2% to 791.36, extending Friday's breakout and clearing the April short-term high of 780.79. Shares are still in range from a 764.55 handle buy point, with the 5% chase zone rising to 802.78. Volume has been strong the past two sessions.
The relative strength line for Tesla stock, though still well off its January peak, is at a five-month high. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
The only negative in the TSLA stock chart was the lack of a real shakeout. Shares have risen for five straight weeks, though not at such a blistering pace that a pullback or pause seems almost inevitable.
On Friday night, Tesla let Full Self-Driving owners and subscribers opt in to FSD Beta. But first Tesla will monitor their driving for seven days. That means FSD Beta could expand to a far wider pool of drivers starting on Friday, Oct. 1. Meanwhile, Tesla could report third-quarter deliveries as early as Friday or as late as next Tuesday.
AMD Stock
AMD stock staged an upside reversal, climbing 2.2% to 108.16 on Monday, rising from its 50-day line and decisively breaking a trendline. Volume was below average, but was the heaviest in several weeks. AMD is working toward a 114.59 double-bottom buy point.
Whiting Stock
WLL stock rose 6.1% to 59.49, clearing a 57.69 buy point from a cup base. The RS line for Whiting stock is at a new high on the breakout, a bullish sign. WLL stock returned to public markets in September 2020, following a bankruptcy earlier in the year.
Targa Stock
TRGP stock jumped 4.3% to 49.46, just topping a 49.30 buy point from a cup base, according to MarketSmith analysis. Targa Resources delivers natural gas and natural gas liquids. Natural gas prices are rising sharply in the U.S. and are white-hot in Europe.
JPMorgan Stock
JPM stock rose 2.4% to 166.98, breaking out of a cup-with-handle base and racing past its 163.93 buy point in volume that was slightly above normal. JPMorgan stock has rallied for five straight sessions, reclaiming its 50-day line and breaking a trendline last Thursday.
MGM Stock
MGM stock rose just over 1% to 45.09, staying within a buy zone that runs to 46.06. The casino giant cleared a 43.87 cup-with-handle base last Thursday after closing slightly below that entry on Wednesday. On Monday, MGM agreed to buy The Cosmopolitan hotel and casino for $1.6 billion from Blackstone (BX).
Hilton Stock
HLT stock climbed 2.45% to 138.80, rising above a 136.99 cup-base buy point, though in below-average volume. Arguably the best time to buy Hilton stock was on Thursday, when it cleared an almost-handle in heavy volume. The RS line for Hilton stock isn't quite at a new high, but is at a consolidation peak and a six-month best.
Market Rally Analysis
The stock market rally had an OK session. The Nasdaq and S&P 500 retreated, but found support at the 50-day line following the strong recovery last week. Meanwhile, the Dow Jones hit resistance at its 50-day line, but at least it's trying to get above that key level after several weeks. The Russell 2000 simply had a very strong day after reclaiming its 50-day and 200-day lines last week.
Growth stocks retreated Monday, partly due to the continued rise in the 10-year Treasury yield. The FFTY ETF showed real resilience in the past couple of weeks after racing to record highs.
Meanwhile, rising Treasury yields and energy prices pushed up the Dow Jones and Russell 2000.
A partial government shutdown or an infrastructure bill defeat could upset the market, but how much would depend on how long the impasse goes on.
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What To Do Now
Monday's mixed market rally and the retreat in growth stocks showed why investors shouldn't get too exposed, especially to a particular sector. That said, a lot of sectors have been working, though not necessarily all on the same day.
Continue to grade your stocks. Are you in sync with the market rally? That doesn't mean all your stocks outperform every day. But are you generally in the right stocks and sectors? If not, you may want to exit some positions and reorient your portfolio, making sure you don't chase extended stocks.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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